Saputo’s simple sweetener

The increased bid by Saputo chief executive Lino Saputo (centre) has the blessing of WCB chairman Terry Richardson (left) and the takeover target’s chief executive, David Lord, (right) and is simple in its approach.
Photo: Rob Gunstone

Simplicity trumped complexity when Canadian dairy group Saputo declared its offer for
Warrnambool Cheese and Butter Factory
free of conditions apart from a conditional increase in its offer price to $9.20 a share.

As well as making it easier for Warrnambool shareholders to get their hands on the cash as soon as possible, the Canadians have removed the complex mixture of franked dividends.

Although franked dividends carry a higher return relative to cash because of the tax benefits attached to them, the bid from Montreal-based Saputo was too complex to understand.

Franked dividends were going to be declared and these needed to be deducted from the offer price. Now there will be $9 in cash straight out an extra 20¢ a share if the company gains more than 50 per cent of the company.

Saputo’s offer now stands head and shoulders above the offers from rival bidders
Bega Cheese
and Murray Goulburn Co-operative.

It will be the highest offer if Saputo gains more than 50 per cent acceptance. When that occurs all those who have accepted the offer already and all those who accept afterwards will receive the additional 20¢ a share.

The reason why it is superior to the Murray Goulburn offer is that it has received Foreign Investment Review Board approval.